Does industry co-location improve corporate information environment?

This study examines how the co-location of firms within the same industry enhances their information environments. We hypothesize that benefits arise from two effects: the industry peer effect, involving intra-industry information spillovers, and the geographic peer effect, related to shared local economic conditions with nearby non-industry peers. Our analysis evaluates how these effects, both separately and jointly, impact analysts’ forecast properties and stock price informativeness regarding future earnings. We find that the industry peer effect is negatively related to forecast dispersion and positively related to forecast accuracy, while the geographic peer effect shows no significant correlation. In addition, stock price informativeness about future earnings is positively associated with the industry peer effect but not with the geographic peer effect. We also find that greater proximity to industry or local peers enables analysts to incorporate more private (relative to public) information into their earnings forecasts, thereby enhancing the firm’s information environment. JEL CLASSIFICATION: M41, D80, G10